In this paper we identify some of the main factors behind systemic risk in a set of international large-scale complex banks using the novel CoVaR approach. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find no evidence that a larger size increases systemic risk within the class of large global banks. We also show that the sensitivity of system-wide risk to an individual bank is asymmetric across episodes of positive and negative asset returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee’s proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk. That financial markets move more closely together during times of crisis is a well-documented fact. Conditional correlations among assets are much higher when market returns are low in periods of financial stress; see, among others, King and Wadhwani (1990) and Ang, Chen and Xing (2006). Co-movements typically arise from common exposures to shocks, but also from the propagation of distress associated with a decline in the market value of assets held by individual institutions, a phenomenon we dub balance sheet contraction and which is of particular concern in the financial industry. The recent crisis has shown how the failure of large individual credit institutions can have dramatic effects on the overall financial system and, eventually, spread to the real economy. As a result, international financial policy institutions are currently designing a new regulatory framework for the so-called systemically important financial institutions in order to ensure global financial stability and prevent, or at least mitigate, future episodes of systemic contagion.